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AB InBev’s Brito Says Deal Would Boost U.S. Beer Competition

Anheuser-Busch InBev NV Chief Executive Officer Carlos Brito, attempting to allay concerns of U.S. lawmakers and craft brewers about the company’s proposed $110 billion acquisition of SABMiller Plc, said the deal would increase domestic beer competition, not weaken it.

While the megamerger would open new markets for AB InBev, Brito said it wouldn’t boost the Budweiser maker’s market position in the U.S. To make sure that’s the case, the Leuven, Belgium-based company plans to sell SABMiller’s 58 percent stake in MillerCoors to joint-venture partner Molson Coors Brewing Co. for $12 billion as it seeks to gain approval from the U.S. Justice Department.

“The purpose of this transaction is to enhance our ability to serve new markets, particularly in Africa, Asia and Central and South America,” Brito said Tuesday in Washington at a Senate Judiciary subcommittee hearing. “If anything, our divestiture of SABMiller’s interest in MillerCoors will create an even more competitive marketplace, building upon what is already a golden age of consumer choice in American brewing.”

Merger’s Impact

The hearing was called to examine the impact of the merger, which would create an entity accounting for about half the industry’s profit and almost a third of all beer sold worldwide. The combined company would hold the No. 1 or No. 2 positions in 24 of the world’s 30 largest beer markets. The Senate subcommittee has no power to block the merger.

Brito said the merger would not only keep competition in the U.S. beer industry where it is today, but would in fact boost Molson Coors’s ability to operate.

Senator Richard Blumenthal, a Democrat from Connecticut, said brewer consolidation over the past few years has created “beer behemoths” that have harmed consumers. AB Inbev’s takeover, he said, should be viewed with a “high degree of skepticism.”

“Through the eyes of consumers, the result has been higher prices,” Blumenthal said. “These megamergers may have been good for shareholders, but not so much for beer drinkers.”

The Justice Department may need to put conditions on the deal before clearing it, Senator Amy Klobuchar, a Minnesota Democrat, said after the hearing. Regulators should seek a “fully independent” Molson Coors and ensure continued competition from craft brewers, she said.

“There should be some conditions to protect this growing industry in the U.S., which is all about U.S. jobs,” Klobuchar said.

Bud or Miller?

Brito repeatedly told senators that the deal wouldn’t affect craft brewers and their access to consumers. The U.S. beer market “has never been so competitive and so open,” he said. Senator Chris Coons, a Delaware Democrat, said he wasn’t so sure.

“Nobody wants to take a seat at a bar and discover their only choices are between a Bud and a Miller,” Coons said.

Brito’s comments were contradicted by Bob Pease, CEO of the Brewers Association, which represents the independent craft-beer industry. He cited the beer giant’s influence over U.S. wholesalers as an example of the company’s unfair competitive edge over smaller players.

“In communities where ABI or a closely related wholesaler is one of two choices for a brewer to access the retail market, the wholesale tier is simply not competitive,” he said.

Some lawmakers said they wanted to ensure that the deal doesn’t restrict distribution of craft beer or their access to ingredients. If those brewers are “squeezed off the shelf” because AB InBev gains power over distribution, consumer choice will be reduced, said Senator Patrick Leahy, a Vermont Democrat.

“I want to make sure they have a level playing field,” Leahy said. “I don’t want them closed out because they can’t distribute.”

Wholesale Concerns

Brito was joined by Molson Coors CEO Mark Hunter in saying that independent wholesalers will remain unchanged after the merger.

“Nothing from this transaction will impact any distributor,” Brito said in response to a question from Blumenthal.

MillerCoors currently owns one distributor and Molson Coors has no intention of buying others, Hunter said. In the U.S., the merger will change nothing other than removing one of MillerCoors’ two parent brewers, he said.

“It will not change consumer choice, it will not change the competitive pricing environment, it will not change our market share or our longstanding support for the three-tier system, it will not change our support of U.S. growers and suppliers, and it will not change the explosive growth of craft brewers or their access to the market through the MillerCoors distributor network,” he said.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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